Transcripts For CNBC Closing Bell 20171016

Going to thaerhear a little about that over the next couple hours. Hes going to join us, famed economist Robert Shiller, cnbc exclusive, to find out what he thinks about people using, yes, bitcoin to buy real estate thats a story were going to cover and ask the professor about it. Amongst other things as well. Geeky valuation questions. No. Yes i studied cfa for exactly this reason i con not rate. Were going to start with health care and a number of health cares from President Trump today on Drug Companies. Health care stocks taking a hit on those comments. Eamon javers is live at the white house if more on that. Reporter here at the whouit house the president of the United States scheduling an impromptu surprise press conference, brought a normal of us reporters to the rose garden, gathered around the podium the president came out with Mitch Mcconnell, republican leader in the senate the purpose of this gathering was for the president to say his relationship with Mitch Mcconnell is better than it was over the summer when the president was assailing Mitch Mcconnell over twitter today he said they got a very good relationship. He did take to number of questions on a number of different topics i had the opportunity to ask him about his marketmoving communities, about Insurance Companies, and Drug Companies. Heres what the president said the Insurance Companies have made a fortune with obamacare. An absolute fortune. As you know, what i did with the cuts at the end, which were all going, you know, youre talk bing about hundreds of millions of dollars a minu s a month goo the pockets of the Insurance Companies. Im very happy with what i did because of that, people are talking now. Democrats are talking to the republicans for a short term taking care of what we will call hoe health care. Reporter also had the opportunity to ask the president about an Economic Development bill that he said that hes prepared to release. He said to me that hes going to release this bill and its going to help the United States leapfrog ahead of other countries but wouldnt give many specifics about whats actually in that bill of course, we know the congressional schedule is very heavily stocked with tax reform, with health care, with daca, the immigration bill that the president would like to see. A number of other highprofile attem items. Whether or not theres room in the agenda for a new Economic Development bill is an open question politically but the president told me today hes determined to release one. He thinks it will help the United States get ahead of other countries and he said it will be so much success, you wont really believe it. The president very much pushing ahead on an economic agenda amid questions from other reporters very chatty President Trump today in the rose garden today guys eamon, what about the timeline for tax reform . Another go at the Health Care Bill was mentioned. Reporter yeah, absolutely. The president has said he wants tax reform as soon as possible he said Mitch Mcconnell is going to do it, hes going to get it done on both tax reform and on health care. Remember the president had been sort of undermining Mitch Mcconnell as something of a failure for not getting the Obamacare Repeal and replace done, his tweets at the majority leader over the summer today, though, a very different relationship taking place, at least in public in the rose garden the president only teasing mcconnell once but saying that this is the guy whos going to bring this agenda across the finish line we dont know exactly when they can make that happen but theyve got the rest of the year to do it. Theyve said that theyre determined to do it. Eamon, thank you. Eamon javers at the white house. Lets turn to netflix now. The streaming giant will report its Third Quarter earnings after the bell today and kick off faang earnings season really just earnings season in general after the banks started it last week Julia Boorstin is here with a preview for us jul julia . Reporter hey, kelly. Netflix shares trading around 200 today hitting another alltime high on growing bullishness about its ability to keep up the companys growth Goldman Sachs reiterating its buy rating and raising its estimates to 235 per share. That implies about an 18 upside from here. Saying, the companys content slate is well positioned to drive subscriber growth above expectations. Jp morgan also raising estimates in price target. Its to 225 citing the companys recent price increase and its tmobile promotion which could add as many as 600,000 u. S. Subscribers over time. Now, when netflix reports after the bell this afternoon, all eyes will be on those subscriber numbers. Netflix projected it would add 4. 4 million subscribers in the Third Quarter. Nearly all of those overseas wall street Analysts Expect slightly Higher Results than that but even more important is what subscriber additions netflix forecasts for the nourt quafourh quarter. Analysts suspect theyll add twothirds of those new subscribers expected to come from the International Markets now with apple partnering with steven spielberg, news of amazon retrenching to chase higher profile shows, well be watching also to see what ceo Reid Hastings says about growing competition. Guys, back over to you. Thank you for now see you later on lets get to our Closing Bell Exchange with Quincy Crosby at post 9 steven gill foil next to her, founder and president of sarg 986 and contributor to the street. Com and Rick Santelli at the cme rick, we had a little bit of news this afternoon on various reports of the president meeting with john taylor, potentially liking him as fed chair and politico saying hes going to meet with yellen later on this week is that moving markets reporter i dont think it is but the markets are moving listen, its very difficult, i think, for the markets to do any better job than us on deciding who the president s going to decide on. But i do know that looking up, i now see were up on the dollar index, yields close to the low price high yields of the day even a 30year bond, a laggard on the curve, yields higher than it closed friday the numbers for the equity markets are getting larger so we are moving that direction. Im not sure if it had anything to do with the press conference because the markets have moved since then i will tell you this, once again, we have data that very few talked about october empire 30. 2. You have to go back eight years. Eight years to find a higher level of month over month manufacturing change through the new york area. So we continue to see this ongoing process of the markets doing their business in a nonvolatile way. And Interest Rates even paying attention to the equity move today. Quincy, lets talk about earnings season. How important is exposure to International Markets going to be this quarter . Well, the earnings season is crucial for the market because youve got a market that is, you know, fully valued at this point and in order to keep grinding higher, you got to underpin it with Economic Growth here and overseas, and you also have to see the guidance positive. We also want to look at the Revenue Growth that top line is very important for the market because that really is the indication of demand demand for that company, zdemand for the sector its both global and domestic. So for this market at this valuations, earnings are crucial. Yeah, well of course get a lot of reports this week what do you headache make of tht were only points away from the 3,000 mark on the dow . The dow is so much less important than people think. That is right. Throw the hats around here and everybody will throw paper in the air and the real numbers are in the s p 500 theyre in oil theyre in dollar valuations theyre in yields. These are the numbers that are going to move the markets. Just for tonight, were up against 52 oil. I cant tell you how important a take and hold of 52 will be not just to the Energy Sector but to the whole market if you can hold 52 overnight and into a session, you can talk 53, 54 s p 500 right now, were just below 2,557. Been scraping it all afternoon if we can hold that number on the bell, get above 2,557 and hold it, then were talking 2,560s, maybe 2,570s. Let me ask you about this oil point, which is interesting, if its popping over the 52 level because of the wti benchmark, because of whats happening with the kurds over in iraq, is that the same thing as if it were happening because it was rising on, you know, strong Global Demand and Global Growth in other words, does that give you the same positive signal about the broader markets no matter how it happens . Its not the same thing, but theyre going to fight in iran all right . People are going to fight each other in that part of the world. They always have never going to be a time of peace. At least i dont think i havent witnessed. Im 53 years old all right . I think if oil trades kind of like in gateways, segment. 52 is a doorway to 50 and doorway to 54. So many people have called for lower prices and prices up around 60 forwa 0 toward the eh year yes, on a daytoday basis were going to trade the inventory numbers, trade the rig counts. Thats fine. How you make a buck overnight. If we cab get toward 54, we can get toward 58. Quincy, as we already mentioned netflix, of course, reporting after the bell first of the faang stocks. Those names you like ahead of this earnings season well, yeah, i mean, youre taking a look at, you know, netflix and the other big Tech Companies, and they probably are going to come in after energy as the biggest revenue producers in this Third Quarter earnings season for the tech sector . Particular, you know, the big guys, the faang names, need to show that they dont have a problem with delivery, components are not an issue, and that they can increase prices. Thats been an issue across the market of companies not being able to raise their prices tech doesnt have that problem i think the market is going to quantity to hear a lot there apple and of course netflix tonight on that. Looki ining across the market, industrials look good and particularly the defense sector. Sarg just went over whats going on in the world. This is a different world than when the wall came down. Defense spending is picking up and its picking up all over the world. And thats a nice part of the industrial infrastructure. You know, quincy, i love, love, love defense and i just bought netflix before we went on the air. Netflix i dont get it. Its an earnings play oh, i thought it was a defense story somehow. Im like who oh, no, i love for investing i love defense you know, what trader doesnt play the faangs on the day of trading . All traders play four, five depending how you spell the word i took a shot on netflix going into the bell. Looking for 7 , 8 stability going in there we go remarkable number. Which actually showed a little bit of a sooftening on nw orders it wasnt the rocking report you think it was. Going to have to leave it there, guys, thank you very much, quincy, stephen and rick. Right. Weve got about 50 minutes, 45 minutes to go before the bell. The dow is higher, but off the days highs, we climbed, up 0. 3 . Coming up, would you buy a house with bitcoin the Digital Currency trading near alltime highs. And even the Real Estate Market is getting in on the hype. Well tell you about that next. I want to know if its just tax evasion. Got to ask diana about this. Plus this week marks the 30year anniversary of the infamous black monday crash of 1987 weve got an exculusive interviw ahead with legendary economist Robert Shiller, going to talk about what stocks could be headed for another selloff like that one. And we want to hear from you, contact the show on share your thoughts with us on twitter, facebook, even send us an email, closin closingbell nbcuni. Com youre watching cnbc, first in youre watching cnbc, first in business worldwide today, a focus on innovation in the Southern Tier is helping build the new new york. Starting with advanced manufacturing that brings big ideas to life. And cuttingedge Transportation Development to connect those ideas to the world. Along with urban redevelopment projects worthy of the worlds top talent. All across new york state, were building the new new york. To grow your business with us in new york state visit esd. Ny. Gov. To grow your business with us in new york state were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. Welcome back there are shares of tesla today down about 1. 5 after the Company Reportedly fired about 400 employees last week after a companywide annual review. Former tesla employee telling reuters the positions of those fired range from soerassociates team leaders and supervisors trading lower on speculation, perhaps, delays in the production of the model 3. We have a news it alert now. Its on louisville basketball coach rick pitino. Eric has those details whats happening thats right. The university of louisville officially fired coach rick pitino today obviously the basketball coach implicated in the fbis investigation into bribery in college basketball. Hed been placed on leave many days while he worked out his contract now hes been officially ired. Back to you, kelly. All right just formalizing quhafs already taking place eric, thank you very much. Right, exactly. Bitcoin hovering near alltime highs now the Housing Market is getting in on the bitcoin craze as well. Cnbcs diana olick is in washington with hr on this story. Diana . Reporter bitcoin is being used to buy regular things from restaurant to retail so why not real estate . The first Single Family home in texas sold to a buyer using bitco bitcoin, closed last month and apparently it was pretty easy. We knew that, you know, bitcoins, cryptocurrency, like any other currency, has an exchange rate, can be exchanged for u. S. Dollars so the challenge which actually wasnt all that challenging was to figure out who would do an exchange that large. Reporter so they turned to bitpay which did the exchange because the seller didnt want bitcoin. He wanted dollars. Now, that will not be the case in Lower Manhattan where one developer is converting an old rental building into new condos. He has several potential buyers who he says want to pay in bitcoin. And he, himself, wants to keep the bitcoins i think ill be able to use it both personally and a developer. Ive been buying some artwork. Personally for me, ive had a bunch of sellers of artwork ask me to pay them in bitcoin. Says that accepting bitcoin gives him a Competitive Edge over other sellers and in a hot market like manhattan, really, whatever it takes to close the deal. Much more on this on cnbc. Com. Back to you guys diana, just real quickly, if somebodys doing this transaction in bitcoin, does that mean theyre circumventing the normal mortgage process . Does this mean this transaction gets reported and have to pay the regular kind of taxes on it or how does that work . Reporter well, thats a big question first of all, nobodys doing it with a mortgage yet. This has not been in the mortgage market. Although im told it is starting to be considered by mortgage lenders as to how they would do this as for taxes it depends on whether youre converting the bitcoin into dollars in which case youre kind of selling it so its capital gains. Not, if its bit cocoin to bitc, the person selling the home is keeping the bitcoin, that becomes a whole different story and still a very gray area that didnt answer anything. Thank you very much for that. Kelly, i also wonder whether we should ask jamie dimon if hell ever offer mortgages in bitcoin. No. The thing to me, the blockchain progress to actually simplify and handle the mortgage piece of this is one of the great things about this technology. This story to me the neighbors probably wonder if youre selling to someone paying in bitcoin. The key question is are sellers go ing to accept it . Which it sounds like some are. It was an example but not that many. Yes, you can ask your buddy lets get more insight from someone who knows a thing or two about housing. Robert shiller on set with us now, about to ring the closing bell with barclays. Thank you for joining us. My pleasure. I almost hesitate to ask. When were talking about people doing real estate transactions in bitcoin, whats in your mind . Ill take bitcoin, too. Because i know that i can sell it and get out of it there seems to be some strange enthusiasm for people get excited about things like new monetary standards you know, i remember buy i dont know. It was more than 100 everyone was talking about it for a while. So this can bitcoin last how long forever . I think gold is a bubble, but its always been a this it has some industrial use. I have it right here yes, so do we. But basically its like a fad thats lasting thousands of years. Dont know when it will gold has certain things going for it. Its easily portable its identifiable. There was a good logical candidate. I dont see that bitcoin is so logical, but it certainly generates excitement you mentioned buy metal i want to quickly mention i saw this quote of yours which i think is perfect for this discussion you said when we were talking about economic history, not enough people know it anymore and theres a need for coursework that doesnt just emphasize modeling in economics but actual narrative history said we learn from reading history, entering the realm of big data going to have lot more need for textual analysis tools, in the foreseeable future will need more economic historians. Economic kdepartments around the country are not set up for this. Were transfixed by hightech these days bitcoin sounds glamorous hightech. Economic history sounds like i had to memorize all those dates. In terms of economic history, 20 years almost to the day from the 1987 crash. Right. Lots of discussions today on cnbc about the similarities or differences then to today. The key thing you pointed to in 1987 was that peoples perception of the market valuation was too high even if the absolute number is lower than in is today does that give you confidence that today is not yet a bubble i dont have any confidence about that i have a valuation Confidence Index which is free on my website. And i find goes back to 89 actually i started my surveys in 89 right after the 87 crash. Ive been doing them ever since through the yale school of management and valuation confidence in the valuation of the market is, indeed, the lowest itsbeen since 2000 and when it got low in 2000, the market fell about 40 . So it was bad. But that doesnt mean it will i dont have enough data to say thats a reliable i think its a danger. I think theres a danger but im not saying to sell everything. Im still in the market, myself. There have been some criticisms, that youre about to celebrate, is widely cited cyclicly adjusted price to earnings ratio looks over cycles and look at valuation that way the market has been overvalued 20 years now based on this methodology. Right thats it seems to have well, not 20 years in 19 in 2009, it got down to 13 right when the dow sold down to 7,000. Right. But my point is, the criticisms that have been made which reminded from justins article among others, you know, some of the earnings, whether its gap or nongap, Different Things people point out about methodology, is it something you would look to update or change i think Jeremy Siegel has been a critic of this methodology as well what would the new cape ratio look like if it needs to be tweaked at all ive been working with barclays bank, reexploring cape. One thing we have is relative cape the relative cape is not as high there might be other things, you know, earnings definitions change but i think the definitions generally changed for a reason so, for example, when they started paying employees with options, then the earnings statements sometimes were misleading didnt properly account for the option value so we have to fasb yeah. Have to adjust the definitions to keep up with the times. They may not have done it right. Personally im a fan of accountants. I think theyre the moral fiber of our society they keep us honest. Professor shiller, thank you very joining us. My pleasure. Let you go ring the closing bell. Ringing the exact bell, exactly, in 33 minutes time. With the dow up 65 points and nearing 23,000, coming up shares of drug maker allergan taking a hit today after a key patent decision about its billion dollar eye drop. Handed down by a texas judge well bring you that story ahead. Up next a new billboard in londons Piccadilly Circus claims to be able to read the emotions of consumers to target ads in realtime. We got details on the futuristic billboard when closing bell returns. Is the monolithic view of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Everyday our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. Your bbut as you get older,ing. It naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. Expestandard. E lexus rx with advanced safety. Lease the 2017 rx 350 for 399 a month for 36 months. Experience amazing at your lexus dealer. This is not a cloud. This is a tomato tracked from farm to table on a blockchain, helping keep shoppers safe. This is a financial Transaction Secure from hacks and threats others cant see. This is a skyscraper whose elevators use iot data and ai to help thousands get to work safely and efficiently. This is not the cloud you know. This is the ibm cloud. The ibm cloud is the cloud for business. Yours. Welcome back to the closing bell. Heres a look at blackberrys new post here at the nyse. Company moving today to this exchange from the nasdaq blackberry also changed its stock ticker to bb from bbry the stock is down today on reports its patent licensing director has left the company. But its moved since that was the most british read of alltime, were going to follow it up with a story of england since hes on the desk today, it says, we thought wed bring in a story from husband hois homelan. Londons piccadilly from online advertisers to specifically target ads in realtime it uses cameras to track, seriously, the make, model and color of cars passing by, the age gender and emotions of nearby pedestrians and the screen can deliver bespoke, i think that means tailored, ad content, triggered by cues from surroundings the display will feature ads from high young dyundahyundai, d others it hasnt given a date when the screen will be permanently turned on. The most scary thing about this, the ability to track peoples data, alter an ad based on whos walking by. Quite astonishing. The surprising thing, the size of four tennis courts. Based on one of the individuals thats passing by. I dont quite get that. The thing thats interesting to me is that, you know, companies have this data already and can get in a weird way its a public service. If youre now aware of how easy it is for all this information to be incorporated into a stupid billboard. Yeah, they got the data on us clearly because, our instagram feeds or whatever, but they have to identify its you going fast to put up the ad thats quite scary. Dont know if theyre using your phone for that with the cars, too. Another reason not to go through Piccadilly Circus. They made that graphic when theres no traffic, never happens. What is that cool sculpture in the middle in the circle . Thats the i should know im not sure i like that. The point being, its just like times square. Anyone that lives there doesnt go there i had to work there for years. Its horrendous. Particularly with this, never, ever is it that light of traffic. I dont know when they filmed it. Anyway, time for cnbc news update with sue herera over to you. Thanks so much. Heres whats happening at this hour new details emerging in connection with the blast near new orleans. Authorities are clarifying it happened on a Natural Gas Storage platform, not an oil rig. They say the chemicals ignited the fire around dawn one employee is still missing and seven others are injured. Winds from Tropical Storm ophelia are fanning flames along spain and portugal wildfires have killed at least 35 people in those countries authorities blaming unusually high temperatures for those fires. Pope francis marking World Food Day today by addressing the u. N. Food and Agriculture Organization in rome the pope calling on governments to Work Together to wipe out world hunger and combat global warming. And favorite story of the day, a discovery in deep space pointing to where gold comes from for the first time, scientists detected Gravitational Waves and light from two nutron stars colliding. Not only did the debris form gold, platinum and uranium, it created a ripple in the fabric of space, which was first theorized by Albert Einstein that collision happened 1. 4 billion years ago. Thats the news update. So youre saying we cant replicate it at home here today. I know, right if you have a nutron star hanging around. Grasso was thinking about it, he was like i can make gold, can make platinum. I had a long weekend. I was doing all of it. All you need is a neutron star, maybe two, actually. Thank you, sue, see you next hour. You got it. Sue herera. Im on the floor with steve grasso speaking of metals, copper all of a suden in the headlines. Threemonth high thats not huge. No, no, threeyear high yeah, copper december thats what it says. Yeah. Youre good. Yeah, i mean, freeport, one of the complex is that a growth thing . Global growth . I think its a Global Growth thing. If you look at the reflation trade or look at china where they were reducing basically the reserve requirement on ratio its not going to take effect until 2018 but youre starting to see the effects of it now. Then you have a lot of supply disruptions. You have basically china export has been light. Right. Their imports have been heavy. Im thinking art it because wednesday we get a huge meeting, of course, chinese leadership, talk about their next plan for the next five years. Is that because people have high hopes for what they can pull off here what are larger factors behind 23,000 on the dow. Back up at 52 on brent this copper move and so much else. I think thats it if you look at the fxi, last time we spoke about thats the chinese the large cap etf so if you look at that, if you look at the performance, the last time that they cut rrr, if the last time they cut it and it went up exponentially basically, i think people are looking for the same thing to happen add in all the things i talked about when we first started talking. When there was supply. Yeah. Issues. Or disruptions a little bit of trump. Import export little bit of trump. Global growth story. So i think the story is still buy equities you look at the dollar, look at the tenyear, look at the equity market still buy equities if youre going to buy it, go for the beta thats the beta. All right think i got that steve, thank you very much written all right there. Get the beta. Thank you. Thank you. Steve grasso. Up next tensions in iraq and platform explosion in louisiana moving the oil markets today ahead, where crude could be heading. Plus were minutes away from netflixs Third Quarter earnings results. Will the success of original shows like Stranger Things help drive subscriber growth well debate where the stock should be heading. Stay tuned here on the closing bell. Your muscles look good, but we should be seeing more range of motion. Im fine. Okay, well lets see you get up from the couch. Im sorry, what . Grandpa come. At cognizant, were uniting doctors, insurers and patients on a collaborative care platform, making it easier to do whats best for everyones health, every step of the way. You may need more physical therapy. Ugh. Am i covered for that . Yep. Look. Grandpa catch grandpa duck woah ha there you go grandpa. Keep doing that. Get ready, because were helping leading companies see it and see it throughwith digital. Welcome back we talked a lot about oil today, but heres the move we are referencing. Crude, for wti contract, up nearly 1 . Brent a little bit more than that all tensions increasing bigtime between iraqi and Kurdish Forces this after reports that iraqi troops have taken control of kurdish oil fields. While tensions grow overseas, here in the United States an Oil Rig Explosion in louisiana last night left seven people injured and one person missing joining us to discuss the impact on oil prices, john, thanks for joining us lets talk about the conflict in Northern Iraq first of all i mean, theres been many years of conflict in that region particularly relating to isis. Is this more recent sparkup something thats going to Impact Oil Prices more . Well, were watching it carefully. You know, theres sort of crisis fatigue around this whole region, i think. Obviously with isis finally getting vanquished and with the kurds working as well as they had with the iraqi central government, we would have thought thered be some placid times here potentially for the country of iraq. That doesnt seem to be the case as you know, the kurds voted for independence ever since then that raised the shackles of every other single country in the region pointing their guns literally at the kurds. And that hit a breaking point last night when the iraqi forces made their moves unfortunately, were hearing about potential atrocities already. A la, isis by iraqisponsored forces this is going to put the geopolitical premium right back into crisis when it looked like they might have been coming out. John, how many barrels or how much crude is at risk in this region that were talking about . Its not an insignificant amount, obviously. Its Northern Iraq historically north of iraq was good for 1 million to 1. 5 Million Barrels a day. The area of karkuk, the center point of the battle, good for 600,000 barrels. Most of which transit out through turkey through a pipeline through turkey to the coast city of sahan. The turks threatened to shut down that oil pipeline so this oil is very much hanging in the balance. But ill tell you, the iraqis were able to move quickly through karkuk and secure much of the major oilproducing assets with little or no fight so that gives us some hope in terms of if youre rooting for lower oil prices, anyway, that this situation is somewhat calmed and the price reaction was fairly muted after initial big jump last night at 6 00 when the markets opened up. And in the last couple of weeks theres been a few other supportive bits of news for oil prices whether coming from opec or russia. Whats your latest forecast for oil prices by the end of the year yeah, or Mother Nature for that matter. Really its been something of a parade of horribles we havent seen in a while for oil prices one price event after the other. Before the hurricanes hit we were in a very steady and serious price down trend prices as low as 46 were looking to head lower. Hewitted reaction you oversupply is still the backdr backdrop, primary driver here and youll see prices trend back down lower to 46, maybe to 42. Before we see a nice rally for the wintertime late, late december thats the opposite of what sarg was saying earlier. John, thanks for joining us, though. Thank you. John with the downside case for oil there. Energy is one of the worst performing sectors this year down 9 pland landon has a look at how hurricanes have especially impacted it. Hey there, kelly, thats right. Prior to harvey, gulf renineries processed 18 Million Barrels a day of crude oil in the following weeks refineries in the area completelydureduced. 65 Million Barrels lost as a result of the hurricanes exxon was impacted the most as two of their gulf coast refineries were hit by harvey. And their gulf of mexico production impacted by nate. While the firms production dips, shares of valero up 18 since harvey Marathon Petroleum up 11 . Exxon near lly 8 . Lipow telling me the hurps had a major impact in production the stock impact has been so minor because there are factors like overall Global Supply glut as well as demand, guys. Back over to you. Kind of what john was just saying thank you, landon. We have about 20 minutes to go before the bell we have got gains, not quite the highs of the day up about 0. 3 for the dow. Less than that for the nasdaq and s p. Health care at the bottom of the stack. We got telcos and banks. One of the fascinating movers is allergan rgoshares are dropping. Wee ing to tell you whats behind the 3. 5 decline when we come right back. I think its terrific. Your kids go to college and you start trading. Yeah, 5 years already. 5 years, hmm. You ever call your broker for help . Once, when volatility spiked. And . By the time they got me an answer, it was too late. Td ameritrades elite service team can handle your toughest questions right away with volatility, its all about your risk distribution. Good to know. Thanks, mike. We got your back kate. Does he do that all the time . Oh yeah, sometimes he pops out of the couch. Help from real traders. Only with td ameritrade. Welcome back to closing bell. Shares of drug maker allergan dropping today after a u. S. Judge invalidated a patent on a popular eye treatment. Meg tirrell has details for us. Reporter thats right, wolf, an eye drop that brings many more than 1 billion a year in revenue for allergan a prescription eye drop for chronic dry eye disease. Allergan had been defending the patents which were due to expire in 2024 against alleged infringement from generic drugmakers teva, mylan and acorn pharmaceuticals. They will repeal the ruling which could take a year to year and a half no generic competitors have been approved by the fda. Allergans stock had been under pressure leading up to the decision as allergan grabbed headlines for transferring patent to the st. Regis mohawk tribe, part of a bid to shield them through the tribes sovereign immunity for challenges in another patent system at least nine congressmen challenged that deal and one, senator claire mccaskill, introduced legislation seeking to aggregate the immunity in the setting to which the tribe responded it was outraged. Of course its debate that will continue to brew as Drug Companies argue the ipr system puts them in double jeopardy defending pa techtents on two t simultaneously the federal court judge ruled against allergan, of course driving its shares down, guys. Meg, the interesting thing about this, though, is going back to the legislation that created the opportunity in the first place. So how was the judge able to simply declare that the company has nowhere with all to do this . Yeah, so the federal judge was just ruling in a sort of traditional patent case on this. Its the other system called interpartus review that this is going on with the tribe. So the judge while he did actually have language about this relationship with the tribe, what he was really deciding on is the patent validi validity, not the validity of this kind of partnership. Oh, so he this has nothing to do with the native american tribe, this is just simply the issue about whether it retains its patent protection . Reporter thats right, these are two separate tracks and the tribe was involved in the ipr track and this was the federal track. Its very confusing system thats part of the reason Drug Companies argue that there shouldnt be these twotrack systems. Others argue the ipr system is vital for dismantling bad patents. Now i understand why jpm today was saying they think allergan already priced in generic restasis confusing one, meg thanks for helping clarify for us. Reporter thanks, kelly. Meg tirrell allergan was down 3. 5 . Coming up, about 14 minutes to go, dows up 78 points right now. S p at 2,557 well see what happens into the close. Netflix hit an alltime high again today as the Company Gives up to report earnings after the bell up next, wheell debate how to play that stock ahead of the results as the bell rings. Were back in a couple minutes its a champagne and models potpourri on my yacht made of cuban mahogany, gany, gany, gany watch this dont get mad bell mnemonic get e trade and get invested looking from a fresh perspective can make all the difference. It can provide what we call an unlock a realization that often reveals a better path forward. At wells fargo, its our expertise in finding this kind of insight that has lead us to become one of the largest investment and Wealth Management firms in the country. Discover how we can help find your unlock. Welcome back just saw arthur ash cashin, said base clidically a nonevent on te close. S p up 3. 5 into the close. Three minutes until the close. Ten minutes to go before netflix reports their earnings many Analysts Expecting another Strong Quarter for subscriber growth the stock is up more than 60 this year. Is there many room to run from this level joining us to debate it on one of the few bears out there, michael from wedbush, also joining us, kevin landis, a believer and doesnt see competition putting a dent in netflixs business lets start with you, kevin. The optimistic outlook, of course, always so important to the stock price on earnings days the subscriber growth number this is traditionally a weak season, this quarter seasonally. What are you expecting and can they beat their guidance well, the first thing to know is that as a buy side investor, long only investor, you really want to Pick Companies that are going to win over the course of years. And picking those winners you probably want to stay with them. So i dont want to say that im going to make a quarter to quarter call here, in fact, were going into this quarter with some pretty High Expectations that usually makes me nervous but in my experience, companies that are in the right place at the right time, that story tends to run a lot longer than you might expect and so even if this is a disappointing quarter, this is a good stock to own. Michael, what are you focused on this quarter . Let me answer the question you asked kevin. I think theyre going to kill it tonight. So i think the stocks up materially tomorrow. This is historically a weak quarter. 750,000 subs they did something pretty brilliant beginning in h may they started stringing their original content together. They actually had so much content in may and june that unless youre superhuman, you could not catch up with it then they launched ozark during the quarter which was actually a really good show i highly recommend it. And they had season three of narco. I think they had enough content to keep people engaged. Just to be clear, michael is our bear here. I am a bear. Correct look, i do netflix, itself, but so kelly we appreciate you lauding the quarter, but i do i do i think theyre going to kill it this quarter. Ive been right i think ive been right 49 out of the last 52 quarters so i think the stocks up materially because i think theyre going to crush the Domestic Subscriber number but i think kevins right but it investors should spoke fon the long term. These guys are hemorrhaging cash and its not getting better. Theyre going to burn 2. 5 billion this year, up from 1. 7 billion last year. The price increase might offset some of that 600 million in higher revenue for the dollar price increase. I think theyre going to burn another 2. 5 billion next year they said theyre going to burn cash for many years and to be honest with you, i dont think theyre building anything. I dont think anything difficbio last in this company look who won the emmys. Wasnt these guys, hulu has an opening here now that netflix is charging 11 bucks. I think this thing is a problem in several years, no the this quarter. Kevin, what do you think about the price increase that went through during the quarter . I think its when you have pricing power, thats always confirmation that youre in a really great position. And i also think that its still an amazing value so they can hit that button. I mean, they probably theyre not going to try to optimize it. They can probably get away with raising their prices a lot faster its a good thing and it will help them. As to the bear case against netflix, i mean, i have to tell you, ive been in this stock for more than a decade it reminds me of a quote from one of the godfather movies, hes been dying of the same heart attack for the last 20 years. Look at the longterm trend on this stock the bear argument hasnt really changed. But kevin, i know youre not the kind of guy youre not the kind of guy whos going to be one of these momentum, it keeps going up so im just going to, you know, ride that horse going up i mean, theres a fundamental missing piece here on the cash flow you mentioned yourself its over a decade old amazon by this time was looking better than netflix is right well, so, look back at some of the best investments youve ever made some of the best stocks ever the arguments in favor of the stock end up being stacked up on one side the only negative thing you can say about them is theyre growing too fast, so sthair burniburn i burning a lot of cash or the stock is too expensive i learned not to buy a stock because its cheap and its the only good thing to say about it. I learned not to get out of a stock like salesforce or another simply when the only good argument is its too expensive thats usually a sign its a really great franchise being built and theyre building a great franchise. Michael, quick final question about the fact tmobile started offering this free to subscribers. Of course, netflix is meant to be a beneficiary where the ko d cordcutting trend, moving away from having to buy things with bundles. Is this actually a glimpse of how in the future these types of services might, in fact, again, be provided through other means and not be such a beneficiary from cord cutting . Oh, absolutely. You know, if i were to change my family from sprint to tmobile, my bill would go up 40 a month then give me back 10. 99 what a bargain it would cost me 29 more to become a tmobile subscriber ye yeah, you can absolutely bundle if you can sucker somebody in to pay for more the underlying service. Thats a great deal. Props to tmobile for coming up with that. Its not a good deal for consumers unless youre a tmobile customer already then its a good deal. There we go. All right. Bearish long term, bearish on the sector. See you again after the bell. Thank you for sticking around. Up nt,ex were coming right back with the closing countdown. So what else is new . Hows your mother . Umm. Shes doing good. She needs more care though. She wants to stay in her house. I dont know even where to start with that. First, lets take a look at your Financial Plan and see what we can do. Ok, so weve got. Well listen. Well talk. Well plan. Baird. Im living that yacht life, life, life top speed fifty knots life on the caribbean seas its a champagne and models potpourri on my yacht made of cuban mahogany, gany, gany, gany watch this dont get mad bell mnemonic get e trade and get invested welcome back to the closing bell, about 90 seconds left to go were up about 83, 85 points, near to session highs for the dow. The nasdaq, 0. 3 the nasdaq and s p just behind lets have a look a sector performance, telc ooros up at te top. Financials doing well, up 0. 7 as well. Health care the only sector thats meaningfully down quick look at oil prices they gained today. Thats helping energy a little bit. Finally a quick look at the dow individual movers. Some of the names there we can see the likes of jf morgan and Goldman Sachs higher Goldman Sachs reporting tomorrow apple doing well walmart suffering after a great week last week seema joins me now what are we looking at were looking at the dow. Took 107 trading days to go from 21,000 to 22,000 now were less than 50 points away from 23,000 as you were pointing out, energy really in the drivers seat today. Oil many times referred to as a geopolitical tool. Thats exactly what were seeing these tensions escalating between the iraqi and Kurdish Forces helping oil outperform therefore, oil and gas stocks continue to move to the upside chevron up 1 or more. Whats been helping dow move to 23,000 is the transports boeing up 25 over the past 3 months. Of course, we keep on eye on netflix which did hit another record high earlier this morning. Its come off a little bit, of course, reports earnings just after the bell which is being run as we speak here at the nyse by Professor Robert shiller and his Barclays Team at the nasdaq by the National Cyber Security Alliance and that is it for the first half of the closing bell. Kellys got the second half. Thank you. Welcome, everybody, to the closing bell, aisle kelly evans. We have another trio of recordclosing highs on wall street today the dow gaini ining 83 points a to close at 22,954 that puts it within touching distance of 23,000 the dow outperformed the s p and the nasdaq the russell actually closed lower. It did not participate but, again, 22,95 on t5 on the e for the dow. S p 500, 4. 5 gain to 2,557 nasdaq up to 6,624 were going to have more on these markets in a moment. We also have netflix touching an alltime high earlier in the session. Closing a little bit lower, i think, which is interesting. Kind of a reversal there ahead of its earnings coming out in just a couple minutes. We, of course, will bring you those numbers, talk about qul you should be a buyer on these results. That is the case with netflix. Joining me to discuss all this today, cnbc senior markets commentator michael santoli. Rob cox is here, global editor at reuters breaking news john blank is with us, chief equity strategist from zachs investment research. Welcome, everybody lets begin with market moves with the dow inching closer to 23,000 with this 84point gain on some more intraday movement than weve seen in some time the winner in the dow was jp morgan today the biggest loser was walmart. Over in the s p, todays big winner was davita. Big loser, pg e, Electric Company that might have a role in the terrible wildfires. Just for a second on the markets, mike, what you make of some of these highs . Another gentle move, really mostly a breakeven day for most of it. Theres still the very slight upward bias. We nudge higher. One of the worst strategies this year, especially this stretch of this year, has been essentially being bearish throughout the day. Buying in the open, selling the close has been very whatever that means, you have this sort of very slight inching bias to the upside and rob, what about you the president today drew attention to the fact that the markets up i think 20 , 25 since his election we had empire state this morning look pretty good i mean, the data really hasnt fallen in place in terms of the fundamentals now were working through earnings season and, you know, so far seems okay. Its pretty early, though. Youve got, well, you had 30someodd companies in the s p 500 report 84 of them Beat Estimates so thats good so theres a sort of fundamental reason to Like Companies and like stocks. The president s certainly right that, indeed, the market is up quite a bit. Its quite funny, though, i dont know if you also saw, he brags about the stock market going up but then also brags about how he managed to slam a few of the health care stocks. With his comments. So that sounds like a lot of sound and fury what people i think are looking for, looking through, are those cash flow statements, those income statements and theyre looking pretty good. And john, to you, you know, we spoke earlier last hour with Robert Shiller talking about valuation in the market overall. But it seems like, you know, if you talk about growth, if you talk about the earnings, if you look even Something Like the u. S. Dollar, its been weak. You have a lot of positive forces working for this market right now. Yeah, kelly, theres actually more froth in these outlooks than you realize the forward p e ratio right now is 18 flat so the typical fiveyear ratio is around 15 so were already 30 overvalued now. Whats even more worrisome about that 18 is its a forwardlooking number on earnings for next year which are now at 146 a share. Just to give you an idea what we have in the bin for 2017 is 131 so we go out one year, we got 15 more share earnings. We go out two years, looking at 160 a share thats so unbelievably rich and thats whats supporting 18 so we might really be john, at the same time for, like, three years running earnings didnt budge. So there could be an element of catchup there we know the forward estimates are always a little bit high. Yeah, but i think this is more than that i mean, youre looking at earnings that are growing 7 , 7. 5 a year, kelly stock market up 14 a year thats a doubling of the earnings that we are seeing in the bin. Thats just too high its too much. Just want to squeeze a few things in before we get netflix earnings by the way, the stock was up during the session today, i misspoke, up 1. 6 . Also higher was oil today. We mentioned the wti there im looking at the board where it was nearly 5 2, kind of u. S benchmark. Brent over 57 this follows reports that iraqi troops have moved in and taken over kurdish oil fields. Theres positive data out of china pushing copper higher as well to a threeyear high. Copper, michael, is up 29 this year at least thats clear, it would seem a clearer read on growth than oil. Yes, i do think thats definitely the case. Outside the United States, especially you have all of the major economies, i think for the first time ever, in growth mode, whether its accelerating or slowing, its still growth mode. That to me is what the overall commodity picture is talking about. I dont think its hot money i think its mostly about demand, a weak dollar, as well, is not hurting that. Rob, looking again at copper, we can talk art supply, talk, freeport was one of the biggest be beneficiaries. A lot of questions about how strong metals have been with the way people are trading them in china. What do you think fundamentally is going on here saw what the imf, world bank reports, everything came away from the meetings over the weekend saying as michael just pointed out that for the first time in many, many years, we have growth synchronized across the planet so growth means i mean, the oil thing may be as much about, you know, the problems in iraq, but, i mean, certainly copper. Look across the metal spectrum and certainly see demand certainly there are also specific elements, specific industries that are requiring more, i mean, this sort of may not be good for oil but certainly good for metals like copper is the move into electric vehicles, for instance but you are there is a valuation is a different issue, a different question but i think, you know, there is a sense that growth has returned and its level across the world. Yeah, no, its interesting you say that, rob, about electric vehicles because i remember reading of trying to understand what that transition is going to mean for platinum and palladium and all of these inputs i dont know, maybe they use them both or theyre going to use the catalytic converters. I need an auto mechanic. Need to get an auto mechanic to explain how this is going to work to us. Its all about the batteries. Cobalt is one of the materials that goes in there, copper is actually part of it, too actually when i was actually recently visiting a battery plant in detroit, and they were showing us how actually every iteration of these batteries, electronic vehicle batteries, reduced uses less an less of these raw earth or other materials. But of course, the quantum, the number is going up dramatically. So it is you do need sort of someone who can go through the periodic table with you and point to the battery. But for palladium and platinum, thats its bearish, right it is regardless. You dont need okay. So those are purely a catalytic is catalytic converter for the gas no, its to clean out the emissions before it goes out the exhaust pipe. You need that regardless . Dont need that with electric vehicles. Okay. I understand. Lets talk about health care which was down today following comments from the president. Saying that health care will be done early next year biotech and pharma also falling when the president said Prescription Drug prices were out of control john, what did you think of those remarks . You know, kelly, i thought it was a step in the right direction. If the president begins to speak with specific language, about specific problems that get to specific solutions, thats going to be a big move forward because im personally a believer that fixing the system in a bipartisan way is the solution and thats what hes alluding to with a shortterm fix. If that gets us on the road to these specific language and him using specific language, i think is a step in the right direction. But what about these comments on biotech is this going to be, you know, introducing a whole new bearish chapter for these names reminisce sent of the hillary tweet from a year or two back . No, i dont think so. Ibb is the ticker on biotech, about 340 bucks a share as an etf. The highs were back last year at about 400 a share it didnt move at all today, kelly. I would saw we got another 60 share to the highs to see what really ibb is all about. I think we continue to go up because its riskon and because i think, you know, these, again, its going to be a very shortterm solutions the big worry on biotech that theres a big plan thats going to knock the spending out of biotechs out of the way at this point. E yyeah, rob we had the 60 minutes Washington Post report, how they could have a role to play in fueling the opioid crisis. From many angles theres pressure on the Drug Delivery system, isnt there . Yeah, he was specific, the president , but specific in a way that suggested topdown price controls almost single payer. Right . I mean, if you look at any single payer like the nhs and the uk, they negotiate drug prices down. And what and thats why drug prices are lower in the rest of the world. He seemed a bit befuddled by this concept this is what it is im not sure, again let me ask you he wants obamacare which is supposed to be free market, supposed to be antifree market, yet hes suggesting some other remedy i dont quite understand it. I am sympathetic to the argument that we in the u. S. Bear the cost of drug development. And that if youre overseas in other countries and taking a u. S. Drug and say, were only going to pay x for it, if im the u. S. Drug maker id rather sell x at 50 overseas than sell it for zero or 10 overseas, whatever the number is isnt the true price at least reflected in what americans are paying is what anybody overseas is i think the point is, people in the drug industry make this point, we are paying for the r d, paying for the innovation and able to spread that around the world and but im not sure that its from the al true wetrc perspective of the Drug Companies that they pay lower in the uk, france, zwjapan, are pa lower for drug products. I would say, yes, the comments were stark from the. President , two opportunities in separate venues to actually made this point but had a decline in the pharmaceutical index today when Hillary Clinton was a candidate, not the president and would whisper Something Like this, the stocks would be down a lot more everyone thinks the verbal tick, a populist gesture by the president , its not going anywhere in congress. Its not going anywhere exactly. Its not going to get done. So on health care, real quickly, michael, he also said a longterm fix is coming for that in march, april. The journal is voreporting its back on the front burner in congress any time we see the potential were talking about now for the aca. Yes, health care broadly. Biotech being one i to do think there are maybe patches. When he talks about obamacare falling apart, hes talking about the sliver of the market, individual marketplace in various states its not the whole thing i think it could be dealt with in patches as opposed to an overhaul. John, quickly before we move back along, speaking of other initiatives, 30 probability the tax legislation passing according to strategis and senator collins not running for maine governor, a likely yes on the tax bill would that get us to lofty earnings estimates in a year or two out as far as youre concerned. It could, kelly, certainly could. Thats certainly one of the big things you pointed out, a probability estimate if you want a 160 or 145 in earnings and all the tax bill, youre putting a 30 number out, thats not high enough for me. I think youve got to get a 70 , 80 number on that tax bill and got to deliver all the goods to get that number and that, again, is all probability and its just too low right now for that number to be real. Rob, strategis was saying if they phase the tax cuts in over a three to fiveyear period, that would be reminiscent of what happened to reagan and bush in the past, didnt get benefits of the moves voters couldnt see them in time, so to speak. Right i mean, again, we still dont even know what the bands look like its so hard to figure out what this is going to look like heard kevin hasset talking about the benefits that would accrue, 4,000 per family, average, not a median if you do math, take 1 million here and of benefit for one family this is the proof is going to be in the pudding. We are so far from even seeing the eggs come out of the refrigerator. Just to squeeze in an extra minute here while we wait for netflix earnings, rob, i wonder if people, going back to the bull market overall, Brian Reynolds was taking a good point about how strong the markets have been. Corporate bonds by investors hit 1. 5 trillion this year he thinks it could go on for another year or two. Is that why were seeing such a relentless stock market rally . Look, were seeing you saw the economist cover a couple weeks ago. Its a bull market and everything so everything from even lowgrade credit, to any kind of stock thats out there i mean, whats really interesting is what did he say, the guy you just referenced, when would it end . Ed it whats going to stop it . Not trying to just dont understand yeah. No us, too. We understand netflix is finally out. The stock is popping a bit on the release. Julia boorstin, give us the numbers. Reporter netflix revenue coming in a hair better than expected, 2. 985. Expectations for 2. 97. A hair better than expected. Now the key number, of course, is netflix, always those subscriber numbers the company adding 5. 3 million net new subscribers in the quarter. That is better than the 4. 4 million that netflix, itself, had forecast and also stronger than wall street estimates now, looking ahead to projected the companys forecast for its subscriber additions in q4, the Company Expects 6. 3 million net new subscribers in q4. That is also better than analyst expectations digging into the eps number here, the companys diluted eps reported at 29 cents the adjusted eps excluding two onetime items is coming in at 37 Cents Per Share adjusted eps of 37 Cents Per Share. Wall street analysts had been looking for eps of 32 Cents Per Share. I just want to note there are those two onetime items there companys forecast for its eps in q4 is 41 Cents Per Share. That is stronger than the 34 cent expectations from wall street see the stock up now about 2 . Thats less dramatic than the swings we usually see for netflix, but im sure well hear more in the earnings call. Going to continue to dig through this letter here. Julia, thank you. Netflix up 2 . Mike, it was up 25 into this report since july. Expectations extremely high had a lot of analysts last week basically raising the bar on what the numbers would be. Seems like its pretty much a beat across the board. Slight in terms of earnings and revenue. Seems Like International subscriber growth, that was the key area where there was outperformance. I do think looking for acceleration into the Fourth Quarter based on their forecast is also, you know, i think the storys in tact is basically i think the takeaway here. Its a matter of exactly how High Expectations got going into this. John, what could you say . Kelly, michael pointed out the international, exactly right about international. What i learned when i looked into the report, they added 130 countries. 13 130 countries to get to 190 countries in one years time and they still havent gotten to ch china and cant get into china if you think about it, what they got going here is a growth rate thats nonu. S. And based on explosion across 130 countries thats the story were seeing here julias number at 37 cents a share is a 5 cent peak which says their getting the Profit Margins out of international subscribers. Thats the other good news got to think this was a good story for this stock today and rob, anything youd add there with the stock up only about 1. 5 right now well, this momentum is clearly on their side. When you look at all the news thats coming from people like at t which said they lost the 30,000 customers to cord cutting, you look at what comcast said a month or so ago i mean, everything is heading toward the netflix model netflix has a huge first mover advantage. And in many of these countries that theyre entering, they are in many respects the first mover. So, i mean, the valuation suggests that theyve already that theyve already won even though theyre still in the game yeah. So thats pa whoa whole othe question again, the business model, momentum is clearly on their side. And heres michael, their content spend. 17 billion, 17 billion over the next several years 8 billion to 8 billion in next year, alone. And i mean, these numbers are astonish they say were still comfortable with our ability to yeah, the 17 billion compares to 14. 4 billion a year ago. So thats basically their commitments to what they know theyre going to be spending over the coming years. Thats their own originals plus licensed content look, i think theyre basically try to follow the amazon playbook here. The streets allowing them to knoll it i would say that amazon was Free Cash Flow positive a lot earlier in the game than netflix is, but its okay because everyone thinks theres so much runway left and also the model really works. If you double subscribers on this, youre not going to have to necessarily double that content spend. Thats the whole bull dream. Those numbers are so big. Guys, thank you very much. Rob cox, john blank, for joining us. Thanks for having me. Netflix up a little less than 2 right now new subscribers. Up next, much more reaction to the numbers. Talk about whether the company is spending too much on original content right now. Were going to talk about President Trumps tough talk on nafta renegotiations its making mexico, canada and u. S. Businesses a little nervous. Well talk about how our economy could be impacted if the u. S. Does end up exiting that trade deal. And we want to hear from you, contact the show via twitter, facebook or over email tell us what youre watching i dont even have netflix, michael, something wrong with me. Theyre not at saturation ye t. Yre watching cnbc, first in business worldwide. Welcome back about a 2. 5 pop call in netflix after it beat earnings estimates lets get back to Julia Boorstin for more on the results. Jul julia . Reporter hey, kelly, netflix ceo going into detail on competition. Theres a whole section in his letter about competition he says that theyre in the early stages of the worldwide multidecade transition from linear tv. Hulu, sling tv, mentions disney announcing plans to go direct to consumer as well as the Facebook Watch tab for original videos. And he said that the only thing that they could do is he says weve had a good head start, our job is is to improve netflix as rapidly as possible by pleasing members by earning their viewing time and staying ahead of the competition in decades to come earlier in this letter he does say exclusive content is going to be the secret to that they also point to the bundling of netflix and tmobiles one family plan. Saying that our partners are enthusiastic about the response these bundles as the excitement around our big content enhances their offerings. They say that the goal of these partnerships is to make it easy for members to sign up and stick around with netflix. Kelly, back over to you. All right julia, thank you joining us for more, ed lee from recode here with us on set ross gerber from gerber kawasaki michael who rejoins us from wedbush. Mike michael, actually i want to start with you you were saying it could be a blowout quarter. Would you apply that word to this you know, i was surprised at the domestic number. I thought it might be higher my estimate was 850,000. I thought it might be over 1 million. I actually thought the tmobile bundle might add a few more subscribers. This is good you know, they beat guidance and thats good. They guided to a solid number for q4 so thats very good but not the blowup that i expected ed, what about youd . I mean, in fairness, they also did raise prices and they didnt really grandfather anybody in and they still delivered these numbers. Yeah, so its a beat across the board, but, you know, one thing that caught my eye is the obligations, of course, on their content. The 17 billion number. 17 billion he flagged in his letter, were doing to look to spend 7 billion to 8 billion next year on original content and rights so, you know, costs keep going up i dont know how much longer that can sustain think about what you could buy with 8 billion. I mean, that is just a huge they this is coming off years. They spent 5 billion, 6 billion. If it jumps to 7 billion or 8 billion. Heres whats interesting, the Downside Risk in terms of the product, itself, theres actually too much good content or content, period, its one screen on your tv and theres a crowded space now. So fuif youre a show runner, ht maker and have a potential deal in netflix, youre not going to just argue for the amount of money, youre going to argue for screen space, where do i fit on tho that screen . A good point, michael saw news corp making this very argument saying these shows can get lost because theres sure. Which is kind of hilarious. No doubt about it i think thats exact kpl ll lly netflix needs. The bottomless you cant run out. More from a Business Strategy point of view, everyones going in this direction, disney, everyones going to have their own thing, netflix has to maintain the head start, get further ahead and be indispen indispensab indispensable. Its not a zerosum game netflix wants to be included with whatever else what are the most popular shows on netflix i think we can show this the ozark one which was just referenced Stranger Things, defenders, castlvania and orange is the new black. Type of shows in you come on to netflix now, youre see it for the first time it goes to michaels point, you want the foot hold, want to own the library, intellectual property ultimately that will keep people coming back. Every new subscriber, everything is new to them thats the draw. Ross, you like netflix. Its over 200 bucks. In the last week for the first time at what point, if any, does the negative cash flow, i mean, does that worry you or is if just part of the story and you kind of sail on with this company well, kelly, you probably remember when i was on the show when the stock was at 95 and the same worries and the same issues were still there and now were at more than double that. And so people have to understand they are not spending money on content. They are investing in the asset that they have andeach dollar spent gives them International Rights to this content for the life of the content. So, you know, theyre investing in their business and need to go all in right now because its not really what you watch. Everybody watches netflix and Something Else its the best value for your dollar in entertainment. I mean, still with the price rise, what is it, 10 bucks, 11 bucks a month, i mean, i cant even park for 11 anywhere, you know so, you know, netflix has a great future michael pachter, let me ask you, theyre now saying they could spend 7 billion to 8 billion this year, 17 billion over the next couple years does it in other words, are they investing big right now to defend their market share so they can sit back one day and say we dont have to spend a dime seems like this is the kind of model where they have to keep spending bigger and bigger every year is that true, a problem, or is that not what you think their longterm plan is . It is true and it is a problem. That statement that theyre investing in shows and they have lifetime rights, thats just bs, wrong, a misstatement. How is that wrong if you own a show, you own a show is there you go name all the shows they own. Because i can come up with 12 that they literally a lly own. Click on originals and theres a list of them. They dont own those. They dont own narcos, dont own orange is the new black, house of cards. Who does . Media rights capital owns house of ards. Lions gate they make the shows for net n netflix. Im friends with the people there. They make the shows it charge them every time. This is interesting, go on about this, michael pachter. I was not aware of this. You said they invest and own the lifetime rights. No, they invest again and again and again and have to pay again to renew season one of house of cards. They dont end season one of house of cards in perpetuity could they buy it, michael . Of course, they can in read what Shonda Rhimes said. She said she left abc because abc made billions of dollars off of her creations and she said its time for her to make billions of dollars. So absolutely, if they want to pay Shonda Rhimes billions, then theyll own it guess what, thats a hard business hbo owns all its content amazon owns all of its originals. Netflix owns about 10 of its originals. That number is going to grow over time. They dont own anywhere near the 2. 5 billion theyre spending ross, are you going to dump the shares now no, im not going to dump the shares what michael is saying is not actually accurate. Hbo licenses shows just like everybody else and they own the rights to the shows and these shows are theirs the point being hbo owns its ororiginals. Youre wrong. Not going to have to invest more and more as time goes on. They have to do it now to keep ahead of everybody ma they that theyll do is level off content spend as they move forward. Once they captured the market share that they okay. Let me get ed in. Clearly moving in the direction of owning more of these originals. Thats true. I think the better sort of way to understand it is theyre moving more toward funding serials, tvtype content versus movies i think theyre really the way forward for a lot of entertainment. It keeps people glued longer certainly. Also, you know, in some ways it can be cheaper to produce. I think that is sort of where the shift in interdanemeentertas happening more than anywhere else new companies in terms of moviepass, thats people are watching fewer movies these days at home, on netflix. I think thats a formula netflix is valely so lyreally tapped in anything else. Where the discussion comes together, the question is, oh, can they level off content spend . Never. If its a treadmill theyre on forever, then its a problem. Right. Because that means it doesnt scale very well. If you can double and triple worldwide membership, and not ramp content spend at all at the same rate, then the math can work. This quarter doesnt answer that thats the correct math, though. This is too early for them to stop investing in content, so we absolutely love the strategy but you can only make so much content. Theres only so many shows if everybodys chasing shows, and theyre spending 20 billion, obviously there isnt that many shows to make, so good stuff. Gentlemen, thank you all ed lee, ross gerber, michael pachter. Very much appreciate it. Netflix shares hanging on to a small gain. Lets get our news update and head over to sf sue herera. Fire crews gaining ground on the California Wildfires winds dying down around wine country where the fire has been most destructive Authorities Say the fires killed at least 40 people and destroyed 5,700 homes and other structures. Remnants of hurricane ophelia are battering irelands coast. Authorities blaming that storm for three deaths trees and power lines are down and thousands of homes have lost electricity. It is irelands worst storm in five decades stores of people missing in connection with the deadly truck bombing in somalias capital officials reporting that at least 302 people were killed in saturdays attack with more than 70 critically wounded. Somalias government is blaming the bombing on an Al Qaedalinked group. And new jersey senator bob menendez suffering a major blow today. After a judge refused to throw out corruption charges against him. The trial will now proceed on all charges. Senator menendez is accused of lobbying on behalf of a florida ophthalmologist in exchange for donations and political gifts. That is the news update this hour kelly, ill send it back downtown to you. All right, sue, thank you very much. Our sue herera equifax was just the latest highprofile data breach in the u. S. Now the pentagon is turning to highspeed traders it figure out how to prevent a mass if attack on our financial and payroll systems. Our fast fake on that snis next. Cities are bidding against one another to become home to amazons Second Headquarters were go iing to look at one of the top competitors, chicago, to see if it meets the businessfriendly criteria amazon is searching for when we come back. Its not just a car, its your daily treat. Go ahead, spoil yourself. The es and es hybrid. Experience amazing. Whether its connecting one of or bringing wifi to 65,000 fans. Campuses. Businesses count on communication, and communication counts on centurylink. Big thinking in the finger lakes is pushing the new new york forward. Were the number one dairy and apple producers in the eastern United States supported by innovative packaging that extends the shelf life of foods and infrastructure upgrades that help us share our produce with the world. All across new york state, were building the new new york. To grow your business with us in new york state, visit esd. Ny. Gov welcome back well take a quick break from threat f netflix for a fast take today. The pentagon, vulnerability project including traders an quant funds. Among the ideas which surfaced from the exercise include injecting false info into data feeds, flooding cell orders to trigger a crash, even hacking some of the widely used payroll systems. Michael, to sew disruption. Its good somebody is trying to game this out i actually think honestly, i dont think anything would work better than actually cutting off the data flow traffic to the markets. So, in other words, depriving the market of quotes okay, dont put more ideas out there. Well, trust me, somebodys been thinking about it so im not too concerned about the Payroll Processing thing, sure, but all this seems like very temporary disruptions, right . I dont know. It could be widespread people get a paycheck once every two weeks at best, basically it would cause a definite economic kickup around the country if it was broad enough. Im kind of glad theyre thinking about this, at the same time, its very frightening. Next, speaking of connectivity, how do you like this new connect tag from samsung . Which can track your kid or pet for up to a week on a single charge its the first Consumer Product to use quote unquote narrow band Network Technology or nbiot if youre taking notes. Probably not the last product to use it samsung will show this off at their developer conference later this week. What price would you mpay to use this product is it zero might be zero until i realize i need it. Looks like the kid could take that thing and put it anywhere. On the backpack. Or some other kid yeah i doeblt knnt know the othe were hearing is how porous things like Wifi Networks are this thing is constantly pulling whatever connected device it has in the area. Yes, thats an excellent point. That could be a who knows if thats a problem or not. Thats an excellent point. Next, are your neighbors millionaires blackstone says yes and is going after the growing crop of people with 1 million to 5 million in assets apparently 7 1 2 times many of these households in the u. S. Theyre starting to rival institutions, Pension Funds in terms of capital and growth potential. Its all about the 401 k s michael, all of wall street seems to be going after this money. With blackstone, this is the 1 million to 5 million range, right, what were seeing its clearly above just your above i guess it does raise the question of this comes at a time when private equitys probably sach waited valuation is high. Valuations are high expected returns in the area are probably not great. A lot more millionaires than there were ten years ago. Sure. Maybe it doesnt hurt to have it on the menu. I dont think this is something people should say, wow, i have to clambor for a piece of this. Look how they reinvented their models yeah, lock it in, all about the asset gathering. Thats right. Finally, Bruce Berkowitz liquidated his fiveyearold fair Home Partnership which held shares of sears and distributed them to clients. Berkowitz is also leaving the sears board and said in a statement he achieved his objective of sharing his views with the retailer, michael shares of sears fell sharply on this news today. Yeah, not sure that was the only objective, just sharing the views. I think honestly i imagine he would have wanted to have some kind of plan, strategy in place to realize your value for equity holders. Seems like this is a little bit of an admission that that didnt work. Yeah. The market has been saying that for a while not sure if there was an easy way out or feasible way out for sears, but has not been execu executed. He was one of the most prominent bulls pounding the table on this company. Shares down the bull case for sears started with berkowitz theyre in it and in it big. Now its lampart. President trump taking a hardline stance on renegotiating nafta. As a new study finds exiting nafta could hurt businesses and investors in the u. S up next, well ask the head of one Manufacturing Company that exports to canada and mexico how s sissou bhibune clde impacted by these talks when we come right back double digits. Rop by it really scared him out of the markets. His advisor ran the numbers and showed that he wouldnt be able to retire until he was 68. The client realized, i need to get back into the markets i need to get back on track with my plan. The Financial Advisor was able to work with this client. Hes now on track to retire when hes 65. Having someone coach you through it is really the value of a Financial Advisor. whoo woman class, lets turn to page 136, recessive traits skip generations. molly i reprogrammed the robots to do the inspection. Its running much faster now. See . Its amazing, molly. Thank you. welcome back lets take a look how we finished the day on wall street. Record setting one with the dow up 85. S p up 4. 5 nasdaq up 18 the russell eked out a tiny gain on the close there, 22,956 for the dow as it does near 23,000 we had netflix earnings cross a couple minutes ago lets check out the stock which was moving higher, 1 preside. 5 check. Much less of a move than we typically see from the company up 25 for this report just since its last one. Time running out in the latest talk of nafta talks the Trump Administration proposes big changes to the agreement. Kayla tausche joins us with the latest details. Reporter kelly, were technically at the Halfway Point of nafta negotiations. Tensions are rising between the three countries as talks now become more substantive and canada and mexico make it clear they dont agree with the substance the u. S. Has put forward. U. S. Trade negotiator Bob Lighthizer called for more u. S. Parts produced in the region and sunset provision that would require the deal to be removed every five years wall street journal editorial called the demands bizarre saying they would, increase Economic Uncertainty and raise inventi incentive for businesses to deploy capital in more delibel investment climates. The effect on jobs could be Material Impact econ says 256,000 u. S. Jobs would be lost if nafta ended, most in the Services Sector boston consulting group, different data, says 50,000 jobs are at risk in the auto industry, alone. Sources say it may be too early for canada and mexico to ditch the deal Justin Trudeau of canada said last week theyre not walking away but might not be too early for President Trump according to people who have been briefed on the talks. Reuters reporting the parties discussed dates for early 2018 negotiations thats a sign that maybe the countries wild keep humming along despite investors fears of the worst that, kelly, would bring the talks perilously close to the mexican election next year which they want to avoid we will see what the three countries say tomorrow at an afternoon press conference. All right is it between three and five, kay kayla . They have a knack for that. Reporter begins at 3 00 tomorrow when we expect to hear thats when we expect to hear from canada, mexico and the u. S a trilateral meeting which might be a good sign, but well see it right here when that happens. Going to. Be very interesting. Joining us right now, one of the authors of the impact econ study cited in the wall street journal. Terry, a partner and director at the group. Terri, thanks for joining us thanks for having me. What do you think the direct impact were to be if the u. S. Were to announce and say, look, were pulling out of nafta basically we analyze the impact of raising tariffs. If the u. S. Just announces. According to wto rules. And the results would be a decline in gdp and unemployment. I wanted to ask before you got into the impact actually how much of an increase were talking about for products like cars and food and textiles so cars in terms of raising tariffs, so cars, it really the analysis actually, its about a 3. 5 increase on average. So these are the mfn rates, which are the rates that are allowed by the so the u. S. Negotiated what the maximum tariff rates are and these are the tariff rates motor vehicles,s around 3. 5 . At the moment, basically zero. On investment motor vehicles, so, for instance, trucks and things like that, its more about 6. 9 and so theyre fairly small changes in tariffs that were talking about. Terry, short of the u. S. Unilaterally backing out of the deal, have you been able to model everyone seems to agree, they could use some modernization to the agreement and been over two decades. Et cetera. Is there any way to think about exactly what potential changes might be on the table on the negotiation that might have somewhat lesser Economic Impacts for the parties . Certainly thought about it. Havent had got round to modeling it yet, but certainly the idea of rules of origin have come up and trying to model some sort of rules of origin or changes in nontariff barriers. Thats something that could be considered rather than worrying so much about tariffs it seems that modernizing the agreement would certainly be something that could be analyzed and id hope that if it was about modernizing the agreement and about nontariff barriers then thered be a few more benefits rather that these costs that were seeing if we raise tariffs. We see costs in low skill job losses in mexico especially. Terrie, well seal happens thank year for joining us. Thank you thats terrie from impact econ. Cities have until thursday to submit bids to become the home of amazons Second Headquarters and theyre, michael, would you shay a little excited about it just a little bit. Slightly. Yeah, scott cohn is chicago, a look at what the windy citys plans are and whether it makes the grade for the contesnet xt contest. Youre watching cnbc, first in business worldwide because, when you really, really want to be there, but you cant. At cognizant, were helping todays leading Media Companies create more immersive ways to experience entertainment with new Digital Systems and technologies. Get ready, because were helping leading companies see it and see it throughwith digital. I just saved thousands in less than a minute, i found out how much home i can afford. I like how you shop for loans the same way you shop for flights online. I didnt realize at lendingtree you can save money on almost any sort of loan. I consolidated my Credit Card Debt with a personal loan. I found a new credit card with 0 interest for 15 months. You just shop, compare, and save. And its all free. Go to lendingtree right now and start saving. saved money on motorcycle insurance with geico. Goin up the country. Later, gary i have a motorcycle wonderful. Im goin up the country, baby dont you wanna go . Im goin up the country, baby dont you wanna go . Geico motorcycle, great rates for great rides. Toss submit their bids to become the home of amazons Second Headquarters is over scott cohn has a look at how the windy city is looking to entice the giant. Reporter hey, kelly, this is one potential site that chicago and the state of illinois is likely to to amazon. This is the Old Chicago Post Office if you think this lobby is massive, you should see the rest of the place this was built when mail order was king, when sears and Montgomery Wards were here at one time the largest post office in the world so a lot of people like the idea of amazon moving in here, but its going to take more than sentimentalality to win this war with pretty much every big city in the country winning we dont know how amazon will score this, but we score the states in our annual rankings, so amazon came out with criteria, but the number illinois does not necessarily do that great it wants a metropolitan area with a million people. Chicago definitely has that, but then it kind of goes downhill. They want a stable businessfriendly environment. This state has arguably the worst finances in the nation the states finances are a mess. Well give illinois an f on that count. The ability to attract top talent this area has neat colleges and universities, thats strong, but illinois does poorly on workforce. Then the ability to think creatively for real estate locations, chicago always says make no small plans, but its a costly place so for illinois, by the numbers, barely a passing grade yet the gonchor of illinois says illinois is the obvious choice. When you compare or progress along with the compelling attributes we have talked about in terms of location, education, work force, Ohare Airport amazon, this is a home run for them to come here. Reporter we are going to be looking at locations across the country, as amazon does. The company says it will announce its decision next year. Kell, . I would love to see that building rejuvenated i thought even chicago passed a cloud tax, so youre right about business friendly. The Weinstein Company could have a big buyer well have the latest on that story, coming up well, its earnings season once again. Yeah. Lot of Tech Companies are reporting today. And, hows it looking . I dont know. Theres so many opinions out there, its hard to make sense of it all. Well, victor, do you have something for him . Check this out. Td ameritrade aggregates thousands of earnings estimates into a single data point. That way you can keep your eyes on the big picture. Huh. Feel better . Much better. Yeah, me too. Wow, you really did a number on this thing. Sorry about that. Thats alright. I got a box of em. Thousands of opinions. One estimate. The earnings tool from td ameritrade. Colony capital given the weinstein a muchneeded lifeline find out if that could turn into a full buyout of on that film studio, when we come right back. Not rebalancing your portfolio. Pursuing your passion, not reacting to market downturns. Focused on what you love, not how your money will last through retirement. Let us help you with those decisions, and get on with your life. We make it easier to plan for retirement with day one target date funds from prudential. Look forward to your 401k plan. Stay with me, mr. Parker. When a critical patient is far from the hospital, the hospital must come to the patient. Stay with me, mr. Parker. The at t network is helping First Responders connect with medical teams in near real time. Stay with me, mr. Parker. Saving time when it matters most. Stay with me, mrs. Parker. Thats the power of and. The Weinstein Company dealing with the fallout from Sexual Harassment and assault accusations against cofounder harvey weinstein, to sell assets to tom bakers Colony Capital, Julia Boorstin has the details. Reporter hes swooping in to save the Weinstein Company, Colony Capital announcing an immediate money infusion, and they shall entered into negotiations for a potential sale baker saying we look forward to working with the critical strategic and distribution to help preserve and create value for all stakeholders including its employees. Colony northstar shares did for climb higher Colony Capital does have a track record of buying distressed miramax, the Prior Company from disney back in 2010. Bar rack made headlines last week and said he was stun are stunned by some of the president s receipt ricks. Next up a Board Meeting weinstein is planning to call in while his attorney is there contesting his firing. Julia, thank you very much lets check on shares of netflix. I was moving higher. A very modest move. The Options Market thought it would be 7 or 8 . Typically a doubledigit move. You often can kind of stir things up, so well see if theres any headlines out of that if it ends flat, i think thats almost a win just because of exactly how excited people were before the numbers came out. As rich peterson pointed out this was a compete where this was serious concern a. Non it sat out the fang rally now its been the outperformer to some degree people are hiding in this. So if that gets taken too far, its not great, but for now it works. I look forward to hearing more on the call michael, thank you. That does it for us. Fast money covers that and it begins right now. Indeed it does live from the market side overlooking new yorks times squares. Im tom wapner in tonight for melissa leyland. Tonight here mohammed elerian, he has a big call on where to hell bet there shored there